Liability car insurance is a type of auto insurance that covers people or property harmed by a driver. Liability insurance does not cover the driver. Rather than being sued by someone who the driver causes harm to, liability insurance is meant to provide financial protection for the driver. Some states require liability insurance to drive.
In states that are no-fault insurance, drivers must purchase personal injury protection (PIP). PIP protects the driver and their passengers. In no-fault states, drivers are required first to file a claim with their insurance company, even if they are not at fault in an accident.
There are two components of liability insurance — bodily injury and property damage. Bodily injury covers those that are injured when the driver is at-fault. This includes immediate and ongoing medical expenses, funeral costs, and any legal fees resulting from a lawsuit.
Property damage covers damage to property outside of bodily injury. This includes the other driver’s car, buildings, and other non-human property involved in the accident.
Liability insurance does have limits. Limits are configurable by the policyholder. The higher the limit, the more the policy will cost. One determining factor when choosing a policy limit is the amount of assets that a person wants to protect. If someone has $1 million in assets and chooses a $100,000 liability policy, they are leaving the remaining $900,000 of the assets potentially exposed to a lawsuit from injury or property damage. Regardless of the limit chosen, any expenses over the limit must be covered by the at-fault driver.
Three Types Of Coverage
Liability insurance limits are broken down into three types:
Bodily injury — limit on expenses related to the injury of each person other than the driver. For example, each individual may be covered up to $50,000.
Property damage — limit on expenses related to property damage. As an example, all property involved may be covered up to $25,000.
Bodily injury per accident — this is the total that the insurance company will pay for all individuals involved. Using the above $50,000 per individual, the maximum per accident might be $200,000. However, if there are five people injured and each requires $50,000 in medical expenses, the at-fault driver is responsible for the remaining $50,000.